Understanding Flat Rate vs. Reducing Balance Funding

When you receive funding, the way the cost of capital is calculated can change how much you actually repay, even at the same headline rate.

With a flat rate track, the cost of capital is calculated once on the original amount you received, for the full length of the term, then split evenly across your monthly payments. Your payment amount stays exactly the same every month.

With a reducing balance track, cost is recalculated each month on whatever balance you still owe. As you pay down the principal, the cost portion shrinks, so your early payments include more cost of capital, and later payments include more principal.

Neither method is inherently better, they simply suit different needs. Flat rate tracks are predictable and easy to budget for. Reducing balance tracks often work out cheaper overall if you plan to pay down your balance steadily. Our live calculator shows you the real numbers for both before you apply, so you can decide with confidence.